From Pymnts · PYMNTS · · 1m 20s
Inflation is eating your raise
Wages are up 3.1%, prices are up 3.4%, and the gap is quietly shrinking what American households can actually buy.
In brief
Wages are up 3.1%, prices are up 3.4%, and the gap is quietly shrinking what American households can actually buy. A raise only counts if it beats the price increases, and since April it hasn't, which is why budgets feel tighter even with more money coming in. Originally reported by Pymnts.
Prices are outrunning pay
American consumers are losing ground. Inflation is rising faster than the wages meant to cover it, and the gap is showing up in household budgets.
“A substantial number of Americans are worse off, their incomes are not keeping up with the price increases right now”
The numbers behind the squeeze
August consumer prices rose 3.4% year over year while average hourly earnings rose 3.1%. Real wages slipped 0.1% from July and 0.3% from a year earlier.
April was the turning point
For a long stretch, pay gains beat inflation and workers were slowly catching up. That reversed in April, after energy costs spiked this year.
“Things were getting better, and now that improvement has blown up.”
Fixed bills come first
Housing, groceries and gasoline get paid before anything else. When those recurring costs climb, restaurants, travel and entertainment are what gets cut.
Paycheck to paycheck feels it most
Among people living paycheck to paycheck who struggle with bills, 53% cut nonessential spending over the past year and only 23% spent more.
Only savers still have room
Households not living paycheck to paycheck were the one group where spending increases beat cuts, 30% to 27%. Everyone else has already trimmed the easy stuff.
“For those already cutting nonessential expenses, another increase in recurring costs leaves fewer expenses available for an easy reduction.”
The main idea
A raise only counts if it beats the price increases, and since April it hasn't, which is why budgets feel tighter even with more money coming in.
